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1. 5 DEMAND
Objectives:
1. Use the demand model to describe buyer behavior in a market economy.
2. Explain the relationship between price and quantity demanded.
3. Describe other factors that can cause demand to shift and explain how they will shift demand.
Directions: Use the video links &/or your textbook to complete the following:
Buyers
Video 1: Market Prologue
Sellers
*Don’t try to draw the graph,
just listen & take notes
The Law of Demand says:
(Draw Graph)
1. Substitution effect ~
Video 2: Demand
Define the Law of Demand
Why is Demand curve
downward sloping?
2. Income effect ~
3. Law of diminishing marginal utility ~
A change in ____________? Move along the D curve (Qty D)
REMEMBER THIS!
A change in determinants of demand? _________ the curve.
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1. 5 DEMAND
Determinants of Demand (SHIFT the curve) notes:
GRAPH THESE
Factors that cause a shift in
Demand:
1. Tastes & Preferences
2a. Related Goods:
Substitutes
2b. Related Goods:
Complements
3a. Income: Normal Goods
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1. 5 DEMAND
3b. Income: Inferior Goods
4. # of Buyers
5. Δ in Expectations
Demand vs. Quantity
Demanded
Explain the difference and
show on graphs.
What happens to Demand
when the price goes down?
Recap: Use the demand model to describe buyer behavior in a market economy. Explain the relationship
between price and quantity demanded. Describe other factors that can cause demand to shift and explain
how they will shift demand.
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1. 5 DEMAND
Practice Questions
1. Explain whether each of the following events represents
i. a change in demand (a shift of the demand curve) or
ii. a change in quantity demanded (a movement along the demand curve)
_____ a. a store owner finds that customers are willing to pay more for umbrellas on rainy days.
_____ b. when XYZ Telecom, a long-distance telephone service provider, offered reduced rates on
weekends, its volume of weekend calling increased sharply.
_____ c. people buy more long-stem roses the week of Valentine’s Day, even though the prices are
higher than at other times during the year.
_____ d. a sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce
their gasoline purchases.
2a. Which of the following would increase demand for a normal good?
A decrease in
a. price
b. income
c. the price of a substitute
d. consumer taste for a good
e. the price of a complement
2b. show on graph:
3a. A decrease in the price of butter would most likely
decrease the demand for
a. margarine
b. bagels
c. jelly
d. milk
e. syrup
3b. show on graph:
4. If an increase in income leads to a decrease in demand, the good is
a. a complement
b. a substitute
c. inferior
d. abnormal
e. normal
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1. 5 DEMAND
5a. Which of the following will occur if consumers expect
the price of a good to fall in coming months?
a. The quantity demanded will rise today.
b. The quantity demanded will remain the same today.
c. Demand will increase today.
d. Demand will decrease today.
e. No change will occur today.
5b. show on graph:
6. Which of the following will increase the demand for disposable diapers?
a. a new “baby boom”
b. concern over the environmental effect of landfills
c. a decrease in the price of cloth diapers
d. a move toward earlier potty training of children
e. a decrease in the price of disposable diapers.
7. Draw a correctly labeled graph showing the demand for apples. On your graph, illustrate what
happens to the demand for apples if a new report from the Surgeon General finds that an apple a day
really does keep the doctor away.